Newsletter January 2010
Quarterly Report
January, 2010
Market Talk
Who in March would have guessed that the Dow Jones Industrial Average would close the year above 10,500? I am sure that there are some out there who did. The law of averages would dictate that of the thousands of pundits making predictions, some were closer to correct than others and a few were nearly on target. These few will be viewed as experts for now, until their predictions no longer ring true. Whoever may be the talking head of the moment in media, sound investment strategy remains, in my opinion, for the most part unchanged. Adjusting how much of your money is exposed to risk should be determined by your own life and financial situation. There was much talk last year about how the buy and hold asset allocation investment strategy no longer worked because everything was falling at the same time. It is true that if one looked at the time period from the end of 2007 to the beginning of 2009 that a balanced portfolio dropped precipitously. But looking at such a short time span can give one an incomplete picture. For all of the gyrations the markets have experienced, the comfort a long term investor has is in the fact that, so far, the markets have neverdropped and then failed to return to new highs. A key to having a healthy investment approach requires not forgetting that risk is real. Ask yourself if you feel more comfortable with your money invested in the stock market today versus one year ago. It is natural to feel better now because things have been humming along nicely for several months in a row and portfolios have grown solidly over the last three quarters. One year ago, we were dealing with the sixth consecutive negative quarter for the stock market and there seemed to be no end in sight. But risk in the market is as high, if not higher now, than it was one year ago. Another key is to determine how much of your portfolio should be exposed to this risk. I try to determine this with you by our conversations as well as through the risk questionnaires I have sent out. A third key, and this one is hard, is to be resolute to holding this balance in good and bad markets. Our human nature, composed of fear and greed, will compel us to want to take more risk when things are going well and will cause us to want to sell the risky investments when prices are dropping. The ability to resist these temptations and hold the course over the long term, I believe, offers the best chance at success.
Housekeeping
You will notice the new format of your quarterly report. I have included information I thought you would want to see without too much clutter. When we talk this quarter, let me know what you think. Thank you for your business and as always, please contact me if you would like to discuss your portfolio.
Sincerely,
Joseph Tomkiewicz, MS, CFP®
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